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House bill introduced to repeal debit interchange cap

WASHINGTON (10/13/11)--Reps. Jason Chaffetz (R-Utah) and Bill Owens (D-N.Y.) Wednesday introduced H.R. 3156, a bill to “repeal the debit card interchange price control provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and restore balance to the electronic payments system.” In announcing the bill, Chaffetz in a release said the debit interchange cap rule “is a perfect example of the dangers of price controls and the inefficiency of government intervention in the free market.” He added that the “legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue.” The Federal Reserve's final debit interchange rule, which became effective earlier this month, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents. The regulation also allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards. Credit Union National Association (CUNA) President/CEO Bill Cheney said Wednesday, “The recent action of large banks imposing fees on consumers for debit card usage and checking accounts confirms what we have feared: That regulation of interchange fees is poor public policy that has opened the door to unintended consequences for consumers and the financial institutions that serve them.” Cheney added, “While most credit unions are exempt from the cap on interchange fees, we continue to have concerns that market forces may render that exemption unworkable. “We are keeping a close eye on the card networks. Credit unions are doing whatever they can to hold the line on new fees – for them, raising fees is a last resort not a first resort.” “In the final analysis,” the CUNA leader said, “as this legislation acknowledges, all consumers would be better off if there were no debit interchange law.”